Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Monday, 27 February 2017

Dodged bullet?

Technical recession averted?

It's been an incredible 100 consecutive quarters since Australia experienced a recession, and it looks as though this remarkable record will just about remain intact.

Today's Business Indicators figures from the Australian Bureau of Statistics (ABS) brought a bit of a mixed bag of news.

Mining profits exploded fully 50 per cent higher in the final quarter of the calendar year to be a rip-snorting 89 per cent higher than they were the March 2016 quarter.

This was mainly driven by prices growth (which feed in nominal GDP) rather than export volumes growth (which form a part of real GDP), so the national accounts will be an unusual beast this time around. 


Mining income also tore more than 22 per cent higher in the quarter to break fresh records.


Gross operating profits across all industries absolutely smoked expectations to be a massive 20.1 per cent higher in the fourth quarter (the market consensus had expected an 8 per cent improvement).

There hasn't been a quarter remotely like it for profits over the past decade-and-half, this remarkable jump being forged on the back of some massive increases in commodity prices. 


Mixed bag

Today's business indicators release wasn't all bullish by any means, with wages contracting in the quarter, although analysts expect to see better things from this metric in 2017. 

Inventories were up by +0.3 per cent, which was lower than the preceding quarter where there had been an apparently involuntary run-up in inventory levels.

But although this will be a drag on GDP growth in Q4 (-0.2 ppts) the result was not nearly as bad as some analysts had feared. 

Overall, the business indicators were perhaps a slight beat on expectations, and some analysts will be marking their GDP forecasts a notch higher for later in the week. 

In all likelihood this means that Australia dodged a technical recession after recording negative growth in the third quarter.

Regardless, whatever happens to real GDP growth, national income is clearly set to lift sharply, while nominal GDP will be maniacally strong for the December quarter.

Australia has done a remarkable job to notch up an unbeaten century in respect of quarters of economic growth.

The challenge now for Oz is whether it can turn an excellent century into a genuine 'Daddy hundred'.

Shot, Explosion, Broken, Bullet